SCHEDULE - II - Accounting Policies for ESPS - SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999

SCHEDULE II (Clause 19.2) Accounting Policies for ESPS: (a) In respect of shares issued under an ESPS during any accounting period, the accounting value of the shares so issued shall be treated as another form of employee compensation in the financial statements of the company. [1] [(b) The accounting value of shares issued under ESPS shall be equal to the aggregate of price discount over all shares issued under ESPS during any accounting period; Explanation : For the purposes of this clause, price discount means the excess of the market price of the shares over the price at which they are issued under the ESPS.] (c) The accounting treatment prescribed above can be illustrated by the following numerical example: Suppose a company issues 500 shares on 1/4/1999 under an ESPS at Rs. 40 when the market price is Rs. 160. The accounting value of the shares being: 500 x (160-40) = 500 x 120 = 60,000 The accounting entry would be as follows: 1/4/1999 Cash 20000 Employee Compensation Expense 60000 Paid Up Equity Capital 5000 Share Premium Account 75000 (Issue of 500 shares under ESPS at a price of Rs. 40 each when market price is Rs. 160) ******* [1] Substituted vide circular no. SEBI/CFD/DIL/ESOP/3/2004/22/7 dated July 22, 2004, w. e. f. July 22, 2004. Prior to its substitution, Schedule II (b) read as under: (b) The accounting value of shares issued under ESPS shall be equal to the aggregate of price discount over all shares issued under ESPS during any accounting period; For this purpose: Price discount means the excess of the market price of the shares at the date of issue over the price at which they are issued under the ESPS.